A simple test for the violation of the non-satiation axiom under uncertainty: The theory

Robert Sproule and Calin Valsan ()
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Calin Valsan: Bishop's University

Economics Bulletin, 2009, vol. 29, issue 4, 2656-2664

Abstract: The validity of most axioms which underlie the expected utility model has been the object of intense empirical testing. These include the independence, betweenness, transitivity, monotonicity, reduction, and non-satiation axioms. The sole, present-day test for the non-satiation axiom is predicated on the first-degree stochastic dominance theorem. This paper outlines the theory for a new, alternative test – one that is predicated on a mean-variance-preserving transformation of a one-trial binomial distribution.

Keywords: Von Neumann-Morgenstern Utility Function; Expected Utility Hypothesis; Non-Satiation Axiom; Binomial Trial; Mean-variance-preserving transformation (search for similar items in EconPapers)
JEL-codes: B4 D0 (search for similar items in EconPapers)
Date: 2009-10-25
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Citations: View citations in EconPapers (1)

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